CITATION: Moloney v Chief Commissioner of State Revenue [2006] NSWADT 25 DIVISION: Revenue Division APPLICANT PARTIES: Stephen Dale Moloney RESPONDENT Chief Commissioner of State Revenue FILE NUMBER: 056021 HEARING DATES: 14/06/2005 SUBMISSIONS CLOSED: 09/27/2005 DATE OF DECISION: 01/31/2006 BEFORE: Hole M - Judicial Member CATCHWORDS: Duties Act - principal place of residence MATTER FOR DECISION: Principal matter LEGISLATION CITED : Duties Act 1997 CASES CITED: Doney v Chief Commissioner of State Revenue [2005] NSWADT 133 Full v Chief Commissioner of State Revenue [2005] NSWADT 190 APPLICANT In person REPRESENTATION: RESPONDENT A Bulbulia, Solicitor ORDERS: The decision of the Chief Commissioner of State Revenue is affirmed REASONS FOR DECISION 1 The applicant has appealed against the imposition of Vendor Duty on the sale of a property at Picnic Point. Circumstances of ownership of property 2 A property was purchased on 30 November 1999 by the applicant and another person. This property was subdivided and one of the lots, the subject property, was registered in the name of the applicant and his wife. 3 The applicant and his wife separated and as part of a property settlement in the Family Court of Australia an Order was made to transfer the property to the applicant. The property was not transferred to the applicant and on 8 October 2004 the sale of the property to a third party was completed (the circumstances of this are referred to in following paragraphs). 4 The property was rented out up to 11 March 2004. The tenants gave notice of intention to vacate to the applicant on 19 February 2004. The applicant stated that he moved into the property when the tenants moved out (i.e. 20 February 2004), his period of occupation of the property was from 20 February 2004 until the ultimate settlement of the sale of the property on 8 October 2004. If the property was his principal place of residence then it was as for approximately 6 months. Relevant Legislation 5 On 5 April 2004 the Government announced that a Vendor Duty would be introduced. The Duties Act 1997 was amended after 23 June 2004 retrospectively introducing a Vendor Duty applicable to particular transactions where the contract was exchanged on or after 1 June 2004. Subsequently the provisions were repealed to the effect that Vendor Duty was not applicable to transactions where the contract was exchanged on or after 2 August 2005. The provisions existed for a period of some 15 months and were subject to various amendments including repeal of Section 162B(4) and introduction of further concessions. This legislation was clearly intended to apply to the sale of investment properties. 6 The applicable legislation in this instance being Section 146 of the Duties Act 1997 which provided that "Vendor duty is chargeable on … a transfer of land-related property, …" The liability to pay Vendor Duty arose pursuant to the combined effect of Sections 147, 150(1) and 151(1) when the agreement for sale was entered into. Section 162A which defines a principal place of residence and Section 162B which sets out the exemption available in respect of the principal place of residence of the vendor are applicable. Section 162B(3) sets out the time requirements of use and occupation: '(3) For the purpose of this Chapter, land is not used and occupied as the principal place of residence of a person unless: (a) the land, and no other land, has been continuously used and occupied by the person for residential purposes and for no other purposes for a period of at least 2 years ending immediately before the date on which, but for this Division, a liability for vendor duty would arise, or (b) the land has been used and occupied by the person for residential purposes and for no other purposes for a total period of at least 3 years in the 5 years ending immediately before the date on which, but for this Division, a liability for vendor duty would arise and during those 3 years no other land was used and occupied by the person for residential purposes, or (c) if the vendor became an owner of the land less than 2 years before the date on which, but for this Division, a liability for vendor duty would arise, the Chief Commissioner is satisfied that the land has been used and occupied by the person as the person's principal place of residence since the vendor became an owner of the land.' 7 Section 162B(4) and (5) were also relevant: '(4) Despite any other provision of this Act, the principal place of residence exemption is also taken to apply to any land used and occupied as a principal place of residence if the Chief Commissioner is satisfied that it is fair and reasonable for the exemption to apply in the particular case. (5) For the purposes of the principal place of residence exemption, a vendor of land that is owned by 2 or more persons is not considered to be used and occupied by the vendor as the principal place of residence of the vendor unless the land is used and occupied as the principal place of residence of: (a) at least one of the owners who is a natural person and whose ownership share is 50% or more, or (b) each of 2 or more of the owners who are natural persons and whose combined ownership share is 50% or more.' Circumstances of sale 8 The applicant and his former wife became the joint owners of the property in early 1999. The property was subject of a lease which commenced in 2000 continuing to 11 March 2004. 9 The applicant and his former wife separated in February 2001, following which, pursuant to an application to the Family Court of Australia Consent Orders were entered into on 18 November 2003 which provided that the property interests of the applicant and his former wife were determined. The relevant Orders included actions (amongst other required actions) as follow: the applicant transfer his interest in the family home to his former wife on or before 30 April 2004 and at the time of transfer discharge any mortgage on that home; the former wife transfer her interest in the subject property to the applicant on or before 30 April 2004, the applicant to indemnify his former wife in respect of any mortgage on the subject property; and that if the above transactions did not occur then an alternate Order provided that the former wife could take action as she may be advised and further ramifications would be imposed at the behest of the former wife. 10 The applicant considered the options available at the time and sought mortgages to allow him to comply with the Orders referred to. Ultimately he was unsuccessful in this endeavour and placed the subject property on the market in February 2004. The property was still subject to the lease previously referred to, the applicant allowed the tenants to hold over on the lease until they found new premises and vacated on 11 March 2004. The applicant moved into the property. 11 The applicant stated that he had intended to keep the property as his family home and that he was forced to sell to be able to comply with the Court Orders. Copies of various letters were supplied to the Tribunal, being correspondence between the solicitors acting for the applicant and those acting for his former wife. This correspondence discloses that the applicant was to retain the property and that although the former wife was of this view she was prepared to agree to the sale occurring subject to various requirements. The applicant continued his endeavour to refinance and also to sell the property. The property did not sell and the applicant reduced the proposed sale price, ultimately by 15% to achieve a sale. A contract was finally entered into on 12 August 2004, and this contract was completed on 8 October 2004. The vendors were the applicant and his former wife, as the subject property had not been transferred to the applicant prior to the sale although this had been anticipated and referred to in the correspondence between the solicitors. Application of Legislation 12 The provision of exemptions from the imposition of Vendor duty, applicable in these circumstances, are those relating to the exemption of the principal place of residence. The applicant provided some evidence of his use and occupation of the property from 12 March 2004 to 8 October 2004. 13 Section 162B(3)(a) does not apply to the particular circumstances as the applicant did not use the subject property as his principal place of residence for 2 years immediately before the liability arose. If the fact of his occupation and use is accepted, the period is approximately 6 months. 14 Section 162B(3)(b) does not apply for the same reasons as Section 162B(3)(a). 15 Section 162B(3)(c) was subject of submissions by both parties as to its applicability to these circumstances. The applicant became owner of 50% of the subject property in 1999. If the Court Orders had resulted in the change of ownership to 100%, as anticipated on 30 April 2004, and the applicant had sold the property after using and occupying it then it may have been possible to suggest that this exemption could apply. The information provided by the applicant discloses that the applicant intended to use and occupy the subject property as his principal place of residence and he submitted that he was unable to finance the action required in the Court Orders and thus had to sell. If the fact of his occupation and use is accepted, his ownership of 50% had not changed and his potential ownership of the other 50% had not been realised, accordingly he could not be considered to have become the owner less than 2 years prior to 12 August 2004. 16 The discretion provided in Section 162B(4) has been subject of comment by O'Connor K-DCJ (President) in Full v Chief Commissioner of State Revenue [2005] NSWADT 190, particularly at paragraphs 22, 23 and 24. Submissions 17 The applicant submitted that the subject property had become his principal place of residence as and from 12 March 2004 and he intended it to be his family home. That he had become the owner of the property pursuant to the Court Orders and that he had ultimately needed to sell due to his inability to obtain a loan. The applicant submitted that it was unjust that he had to pay Vendor Duty. 18 The representative of the respondent made comprehensive submissions directed to the application of the legislation to the particular circumstances. Whilst he noted that the evidence provided by the applicant as to the use of the property as the principal place of residence of the applicant was limited this did not have any ramification as the period of use and occupation was approximately 6 months. Insofar as the applicant's submission relating to becoming owner within the meaning of Section 162B(4), the respondent's representative submitted that the applicant was an owner of the property at the latest on 8 August 2001. 19 The representative of the respondent submitted that Doney v Chief Commissioner of State Revenue [2005] NSWADT 133 could be distinguished as that taxpayer had occupied the property for 21 months out of a total period of 3 years and 6 months and that Block J had held that: "… when the taxpayer sold the property she "did in substance, if not in strict fact, sell her [principal place of residence]" and the discretion in s. 162B(4) should be exercised in her favour." 20 He also submitted that Full v Chief Commissioner of State Revenue [2005] NSWADT 190 could be distinguished as the facts in this case do not point to any specific considerations which would suggest that the Chief Commissioner of State Revenue's decision to not exercise the discretion in Section 162B(4) should be overturned. Reasons 21 In Full v Chief Commissioner of State Revenue [2005] NSWADT 190 O'Connor K – DCJ (President) commented at paragraph 26: "26 As the Tribunal sees it, a primary role for a dispensing power is to permit relief to be afforded in relation to cases of a kind which, had they been known to exist at the time the law was being framed would, in all likelihood, have been given exemption." and at paragraph 27: "27 The dispensing power also provides a means for dealing with minor non-compliance with the strict rules: for example, a case that just falls short of the statutory period, and about which there are other extenuating circumstances." 22 The applicant has sought review of the decision of the Chief Commissioner of State Revenue made on 22 February 2005 to require payment of Vendor Duty on the sale of the subject property in accordance with the Notice of Assessment dated 8 December 2004. The applicant contends that his occupation and use of the property for approximately 6 months permits the application of the exemptions relating to the principal place of residence to be applied. 23 The question then is should the discretion in Section 162B(4) be exercised in the circumstances. Is it fair and reasonable to apply the exemption although the period of use and occupation, as suggested, is approximately 6 months. 24 The circumstances do not point to any particular consideration, other than financial, which would have warranted a specific exemption to be included at the time of framing the legislation. ORDER The decision of the Chief Commissioner of State Revenue is affirmed. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.